Royal Courts of Justice
Strand, London, WC2A 2LL
Before:
MR JUSTICE AKENHEAD
Between :
CARILLION JM LIMITED | Claimant |
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PHI GROUP LIMITED | Defendant |
-and- | |
ROBERT WEST CONSULTING LIMITED | Third Party |
CARILLION JM LIMITED | Claimant |
-and- | |
ROBERT WEST CONSULTING LIMITED | Defendant |
Peter Fraser QC and Serena Cheng (instructed by Dickinson Dees LLP) for the Claimant
Martin Bowdery QC and Ronan Hanna (instructed by Mills & Reeve LLP) for the Defendant in HT-10-11
Simon Hughes QC (instructed by Fishburns) for the Defendant in HT-09-152
Hearing date: 15 June 2011
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JUDGMENT
Mr Justice Akenhead:
On 15 June 2011, I handed down judgement on liability and quantum in this matter. There remain issues in relation to costs as between RWC and Phi. An order for costs has been agreed between RWC and Carillion, to the effect that RWC is to pay Carillion its costs on a standard basis up to 28 December 2009 and thereafter on an indemnity basis; in addition, RWC is to make an agreed payment on account of costs of £700,000. I have heard oral arguments and also received written submissions from Phi and RWC on costs.
The procedural background is that in the first Claim issued in 2009, in which Phi was the defendant, RWC was joined in as a third party and a contribution sought against it. Those proceedings were compromised in May 2010. By then, Carillion had instituted in March 2010 its own proceedings against RWC as defendant, in which RWC joined in Phi as a third party seeking a contribution.
Just before joining in RWC in the 2009 proceedings, Phi made what it suggested was a Part 36 Offer to RWC. In its solicitors’ letter dated 5 February 2010 to RWC’s solicitors, the following was said expressly in the context of the 2009 proceedings:
“4.3 Our client does not wish to extend costs on further legal and expert views and acknowledges that its likely liability (alongside your client’s) coupled with the irrecoverable costs of defending a claim such as this, make an early settlement preferable. On this basis our client offers to split liability with your client on a 70:30 basis (in your client’s favour).
4.4 We consider on discussing this matter with our expert and counsel that your client’s apportionment of liability may well exceed 30%. Notwithstanding, in order to be sure of the offer providing costs protection, coupled with a desire to conclude a speedy resolution of the dispute, our client’s offer is that your client accept 30% liability.
4.5 This offer is made under Part 36 of the Civil Procedure Rules and the offer is intended to have the consequences of Part 36 of the Civil Procedure Rules.
4.6 Notwithstanding, in light of the pressing timescales in this claim, our client would be grateful if your client’s response to this offer could be provided within the next 7 days…
4.10 If there is any aspect of this offer which is unclear would you please let us know within 7 days and we will endeavour to provide an appropriate clarification…
6.2 We look forward to receiving your client’s response to our client’s Part 36 offer, within 7 days if possible…”
This offer was never even acknowledged, let alone answered in one way or the other.
RWC was joined in as a third party into the 2009 proceedings following a hearing before Mr Justice Edwards-Stuart on 10 March 2010 at which in effect Phi sought not only to join RWC in to the proceedings but also to secure their participation in the full trial which was due to go ahead in May 2010. The learned judge allowed RWC to be joined in but refused to order that RWC be required to participate in effect because Phi had acted too late. As the main judgement indicates, Phi and Carillion then settled and it is undoubtedly the position that Carillion very much took into account the fact that Phi’s insurance was worth £3m in total and that its new holding company was in all probability topping up the settlement figure from its own funds. The contribution proceedings within the 2009 proceedings however remained alive and were ultimately to be dealt with at the trial which has recently been concluded.
By November 2010, it was clear to RWC and Phi that Carillion’s claim was quantified at over £8m gross, and included substantial sums for the future Chiltern costs. Two further offers were made by Phi’s solicitors on its behalf to RWC. On 4 November 2010, they wrote on a “without prejudice save as to costs" basis to RWC’s solicitors shortly before a mediation between RWC and Carillion, which Phi was not able to attend:
“…our client is willing to agree in advance of the mediation that should the mediation result in a full and final settlement of the claim between your client and Carillion (specifically, that it extinguishes your client’s liability to Carillion for negligence and/or breach of contract arising out of any aspect of your client’s works whatsoever in connection with the Wembley LMD project, including those works (whether undertaken in 2004, 2005 or 2006) which are the subject of Carillion’s legal action), our client would be prepared to agree to a discontinuance of its proceedings against your client, in return for your client discontinuing its proceedings against our client, with no order as to costs.
The above is not a ‘starting point’ for negotiations by our client. Our client could have written demanding a contribution towards the sums it has paid to Carillion and/or towards the costs it has incurred progressing its claim against your client. Rather the offer above is intended to be a realistic commercial proposal to permit the resolution of the entire dispute with out further wasted costs on all sides.
This offer is open until 5 pm on the 16th of November at which time it shall be deemed withdrawn as our client will then be beginning its preparations for trial. Clearly, however, if the offer contained within it is not accepted by your client within the prescribed time, we will be referring to this letter, and the offer contained within it, when questions of costs of the ongoing litigation come to be considered by the Trial Judge…”
The mediation between Carillion and RWC failed and Phi’s solicitors, being apprised of that, wrote another "without prejudice save as to costs" letter on 29 November 2010 to RWC’s solicitors:
“Our client now writes to propose settlement on very similar terms to those previously proposed, namely: (i) with a discontinuance of a contribution proceedings ongoing between our respective clients; and (ii) with each party bearing its own costs to date, but without a condition that your client’s claim against Carillion is settled…
With the above in mind our client offers to agree to a discontinuance of its proceedings against your client, in return to your client discontinuing its proceedings against our client, with no order as to costs.
This offer will be open for 21 days, however if your client intends to accept this offer your client is encouraged to confirm the same as soon as possible-as costs on all sides (specifically with regard to experts’ costs) will be saved if the contribution actions are swiftly concluded.
Whilst this offer cannot be made on a Part 36 bases as it prescribes costs consequences, should the offer contained within this letter not be accepted by your client within the prescribed time, we will be referring to this letter, and the offer contained within it, when questions of costs of the on-going litigation come to be considered by the Trial Judge…”
Neither of these two letters were acknowledged let alone substantively responded to by RWC or its solicitors. Both letters had been headed by reference to the 2009 proceedings and not expressly to the 2010 proceedings. The trial proceeded with the consequences set out at length in the principal judgement.
There are a number of issues raised by Counsel for Phi and RWC:
Whether any proportion of Carillion’s costs should be borne by Phi; RWC argues that 60% of Carillion’s costs should be borne by Phi to reflect the apportionment which has been made as between the two of them. Phi argues that none of Carillion’s costs should be borne by it.
Whether and in what proportion Phi should pay the costs of RWC’s contribution proceedings against it. RWC argues that, as it has succeeded in effect in securing a net additional sum of more than £500,000 from Phi over and above what Phi has paid to Carillion by way of the settlement, it should have all its costs. Phi argues that it should pay no part of RWC’s costs.
Whether and in what proportion RWC should pay the costs of Phi’s contribution proceedings against it. Phi asserts that RWC should pay all of those costs whilst RWC argues the reverse.
As to costs generally, the Court retains an absolute discretion in the context of the CPR to order what is fair and reasonable in all the circumstances. The exercise of the Court’s discretion involves all the circumstances including the conduct of the parties, the extent to which at least in broad terms time and resource has been spent by one party or the other on issues which it has effectively lost and the existence of any appropriate "without prejudice save as to costs" or Part 36 offers.
A key element in Phi’s argument relates to the offer made in its solicitors’ letter dated 5 February 2010 which it classifies as a Part 36 Offer; if that is right, it argues that, as it was never withdrawn in accordance with Part 36, it remained current and capable of acceptance at any time up to judgement; as it was never accepted, the costs of the respective contribution proceedings in both Claims should be borne by RWC because the latter recovered less than the 70% contribution offered by Phi from Phi. It is therefore necessary to consider Part 36 and some of the authorities arising.
Part 36 so far as it is material states:
“36.A1-1) This Part contains rules about
offers to settle; and
the consequences where an offer to settle is made in accordance with this Part…
–(2) Nothing in this Section prevents the party making an offer to settle in what ever way he chooses, but if the offer is not made in accordance with rule 36.2, it will not have the consequences specified in rules 36.10, 36.11 and 36.14.
36.2-(1) An offer to settle which is made in accordance with this rule is called a Part 36 offer.
A Part 36 offer must –
be in writing;
state on its face that it is intended to have the consequences of Section I of Part 36;
specify a period of not less than 21 days within which the defendant will be liable for the claimant's costs in accordance with rule 36.10 if the offer is accepted;
state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and
state whether it takes into account any counterclaim.
36.3-(1) In this part-
the party who makes an offer is the “offeror”;
the party to whom an offer is made is the "offeree”; and
"the relevant period" means-
in the case of an offer made not less than 21 days before trial, the period stated under rule 36.2(2)(c) or such longer period as the parties agree;
otherwise, the period up to the end of the trial or such other period as the court has determined.
A Part 36 offer-
May be made at any time, including before the commencement of the proceedings…
After expiry of the relevant period and provided that the offeree has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the court.
The offeror does so by serving written notice of the withdrawal or change of terms on the offeree.
36.7-(1) A Part 36 offer is made when it is served on the offeree.
A change in the terms of a Part 36 offer will be effective when notice of the change is served on the offeree.
36.9-(1) A Part 36 offer is accepted by serving written notice of the acceptance on the offeror.
. . . a Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer) unless the offeror serves notice of withdrawal on the offeree.”
36.11-(1) If any Part 36 offer is accepted, the claim will be stayed.
In the case of acceptance of a Part 36 offer which relates to the whole claim the steady will be upon the terms of the offer…
36.14(1) This rule applies where upon judgment being entered –
a claimant fails to obtain a judgment more advantageous than a defendant's Part 36 offer; or
judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer.
. . . where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is entitled to —
his costs from the date on which the relevant period expired; and
interest on those costs.
. . . where rule 36.14(1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to –
interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;
his costs on the indemnity basis from the date on which the relevant period expired; and
interest on those costs at a rate not exceeding 10% above base rate."
An authoritative judgement on this has been given in the recent Court of Appeal case of Susan Gibbon v Manchester City Council [2010] EWCA 726. Lord Justice Moore-Bick with whom the other two senior members of the court agreed and said this:
“4. It can be seen from Part 36 as a whole, as well as from the extracts cited above, that it contains a carefully structured and highly prescriptive set of rules dealing with formal offers to settle proceedings which have specific consequences in relation to costs in those cases where the offer is not accepted and the offeree fails to do better after a trial. In cases where there has been no Part 36 offer or a Part 36 offer has been bettered the judge has a broad discretion in dealing with costs within the framework provided by Part 44. Rule 44.3(4) provides that when exercising its discretion as to costs the court will have regard to the general rule that the unsuccessful party should pay the costs of the successful party, but will also have regard to the conduct of the parties and any payment into court or admissible offer to settle made by one or other party which falls outside the terms of Part 36. In seeking to settle the proceedings, therefore, parties are not bound to make use of the mechanism provided by Part 36, but if they wish to take advantage of the particular consequences for costs and other matters that flow from making a Part 36 offer, in relation to which the court's discretion is much more confined, they must follow its requirements.
5. Part 36 is drafted as a self-contained code. It prescribes in some detail the manner in which an offer may be made and the consequences that flow from accepting or failing to accept it. In some respects those consequences reflect broadly the approach the court might be expected to take in relation to costs; in others they do not; for example, rule 36.14(3) allows the court to award a claimant who has obtained a judgment at least as advantageous as his offer interest on the sum for which he has obtained judgment at an enhanced rate of up to 10% over base rate, costs on the indemnity basis and interest on those costs at an enhanced rate as well.
6. Basic concepts of offer and acceptance clearly underpin Part 36, but that is inevitable given that it contains a voluntary procedure under which either party may take the initiative to bring about a consensual resolution of the dispute. Such concepts are part of the landscape in which everyone conducts their daily life. It does not follow, however, that Part 36 should be understood as incorporating all the rules of law governing the formation of contracts, some of which are quite technical in nature. Indeed, it is not desirable that it should do so. Certainty is as much to be commended in procedural as in substantive law, especially, perhaps, in a procedural code which must be understood and followed by ordinary citizens who wish to conduct their own litigation. In my view, Part 36 was drafted with these considerations in mind and is to be read and understood according to its terms without importing other rules derived from the general law, save where that was clearly intended.”
I can do little to add to this other than to say that Part 36 is clearly to be treated as prescriptive and, to enable a party to secure its concomitant benefits, it must comply clearly with the requirements in making its requisite Part 36 offer. The primary arguments in that case related to the effect of rejections of the Part 36 offer is made by the defendant in that case. The learned judge, having set out the particular offers and rejections which were made, said at Paragraphs 16 and 17:
“16. In my view, attractive though these arguments are, they cannot be reconciled with the clear language of Part 36, or indeed with the scheme which it embodies. Rule 36.9(2) is quite clear: a Part 36 offer may be accepted at any time unless the offeror has withdrawn the offer by serving notice of withdrawal on the offeree. Moreover, it may be accepted whether or not the offeree has subsequently made a different offer, a provision which is contrary to the general position at common law. The rules state clearly how a Part 36 offer may be made, how it may be varied and how it may be withdrawn. They do not provide for it to lapse or become incapable of acceptance on being rejected by the offeree. That would be the case at common law, but it is inconsistent with the concepts underlying Part 36, which proceeds on the footing that the offer is on the table and available for acceptance until the offeror himself chooses to withdraw it. There are good reasons for that. An offer which appears unattractive when made, and which is therefore rejected, may become more attractive as the proceedings progress and the parties reassess the strength of their respective cases. A defendant who chooses to leave his offer on the table may tempt the claimant into accepting it, with the benefit to himself of the consequences for costs of an offer made at an early stage. Part 36 allows a defendant (or for that matter a claimant) to decide whether to leave his offer open for acceptance or to withdraw it and make another offer later. To import into Part 36 the common law rule that an offer lapses on rejection by the offeree would undermine this important element of the scheme. It could give rise to disputes about whether the offer had been rejected in any given case so as render it incapable of acceptance. In Sampla v Rushmoor Borough Council[2008] EWHC 2616 (TCC) Coulson J. held, largely for these reasons, that the rejection of a Part 36 offer does not render it incapable of later acceptance. In my view he was right to do so.
17. Nor do I think that the letter of 18th February 2009 can be read as containing an implied withdrawal of the Part 36 offer. Rule 36.3(7) provides that an offer is withdrawn by serving written notice on the offeree. In my view that leaves no room for the concept of implied withdrawal; it requires express notice in writing in terms which bring home to the offeree that the offer has been withdrawn. If justification for that requirement is sought, it can be found once again in the need for clarity and certainty in the operation of the Part 36 procedure. Although the rule does not prescribe any particular form of notice, in order to avoid uncertainty it should include an express reference to the date of the offer and its terms, together with some words making it clear that it is withdrawn. There may, of course, be cases in which the terms of the notice are less clear than might be wished so that there is room for argument about whether the notice fulfils the requirements of the rule. However, that is a different question. The letter of 18th February 2009 did not refer to the Part 36 offer and did not contain any language that might be construed as a notice of withdrawal. In my view it was quite incapable of constituting a notice of withdrawal of the kind required by rule 36.3(7).”
In broad terms, one can draw from this part of the judgement and the rules that one can in effect only withdraw a Part 36 offer by a notice in writing by the offeror to the offeree; it matters not that any Part 36 offer has been rejected or even simply ignored by the offeree. If it has not been properly withdrawn, it can be accepted at any time and remains valid. One can not imply the withdrawal of an offer by conduct, and even rejection of the offer does not undermine its continued availability for acceptance. Purely contractual principles relating to when and how an offer may be considered to have been withdrawn or to have lapsed are immaterial in this consideration.
The first exercise in this case therefore is to determine whether or not, on a proper reading of the letter of 5 February 2010, it was a Part 36 offer which complied with the provisions of Part 36. I have formed the view that it did not comply for the simple reason that it did not, as prescriptively required by Part 36, “ specify a period of not less than 21 days within which [RWC would] be liable in accordance with rule 36.10 if the offer is accepted". Although Paragraph 4.5 of the letter said that the offer was "made under Part 36…and the offer is intended to have the consequences of Part 36…”, this does not, in my judgement, begin to comply with the prescriptive requirements of Rule 36.2. A Court should be cautious about seeking to introduce purely contractual interpretation and construction principles into the exercise of determining whether an offer is compliant with Part 36. It should however be clear that it is compliant. The failure to spell out a 21 day period is an important one because it provides not only a timetable within which the offeree needs to accept the offer but also points the offeree to the cost consequences of accepting it. This is perhaps even more important when, as here, the offeree was not yet a party to the proceedings (albeit that an incipient Pre-Action Protocol process was underway) and the offeree was nowhere near as well informed about the underlying litigation as Phi was.
It is of course the case, notwithstanding this, that the letter of 5 February 2010 can be construed as a contractual offer capable of acceptance. Put another way, if RWC had written back and said “Yes, I accept your offer on the basis that I am to be responsible only for 30% and you, Phi, are to be responsible for 70% in relation to any liability you are found to have to Carillion in this Claim”, there would be a concluded contract in relation to the 2009 Claim. On that basis, a contractual offer can be withdrawn at any time and, it seemed to have been accepted, properly, by Counsel in argument, that an offer can be withdrawn by express words, lapse of time or conduct. In my view, the letters sent in November 2010 by Phi in effect and by conduct implied that the earlier offer had been withdrawn. The February offer was in effect on a percentage basis; the offers made in November were on the basis that Phi’s contribution to any overall settlement which RWC might be able to make with Carillion would be no more than Phi had paid out in its settlement with Carillion (£3.8 million gross). It had gone from a percentage offer to a cash offer and therefore the November 2010 offers were wholly inconsistent with the February 2010 offer: a recipient of the later offers would properly assume that it was being offered in effect a cash contribution and not, any longer, a percentage contribution.
The consequence of this therefore is that the February 2010 offer was valid and open for acceptance until it was withdrawn in effect on 4 November 2010. Thereafter, the only offer open for acceptance was the letter of 29 November 2010, by which in effect Phi was offering to limit its contribution to what it had already contributed by way of damages to Carillion’s claim in the two sets of proceedings; that, on analysis, for the reasons explained in the main judgement, was in the net sum of £3.45 million.
There is an added complication, which is that the offer made in February 2010 was, understandably, limited to the 2009 Claim, that is Carillion’s claim against Phi in which RWC was brought in by Phi for a contribution. Although the contribution proceedings in that Claim were not settled, the Claim as between Carillion and Phi was compromised on 18 May 2010. At that stage and in those proceedings, Phi could only have sought a contribution (in terms of the damages) in relation to the settlement sum of £3.8 million gross, equivalent as I found to £3.45 million net of Carillion’s costs. No attempt was ever made by Phi’s solicitors to seek to convert or extend the February 2010 offer from relating not only to the 2009 but also to the 2010 proceedings in which RWC was the defendant seeking a contribution itself from Phi. Although it is possible to construe the November 2010 letters, expressly and superficially relating only to the 2009 proceedings, as effectively offering an overall settlement in relation to both sets of proceedings (because the letters offered discontinuance in both sets of proceedings), the November offers were not successful in practice because Phi was required by the main judgement to pay more than it was offering to settle for in those letters.
The Carillion Costs
In that context I turn to the Carillion costs which RWC has been ordered, albeit latterly by consent, to pay to Carillion. It does not automatically follow that, simply because the Court has established a particular apportionment of liability as between a defendant and a third party, the Claimant’s costs should be payable by the third party in the same proportion. The Court has an overall discretion which is not circumscribed by the 1978 Act, either expressly or by implication. Thus the Court can take into account the offers made, the conduct of the parties and all other material circumstances.
I have formed the view that it would be wholly wrong to order that Phi should pay 60% of Carillion’s costs. My reasons, not in any particular order of importance, are as follows:
There was an offer open for acceptance from Phi to RWC which was open for acceptance any time from early February to early November 2010. In reality, if RWC had accepted that, although it would only have settled the contribution proceedings in the 2009 Claim settled as between Phi and Carillion, the commercial reality is that it could well have set the scene for the effective resolution of RWC’s contribution proceedings in the Carillion claim against RWC. It was, certainly as it turned out, a generous offer which, doubtless, RWC would have wished, in hindsight that it had accepted.
.
There are a significant number of respects in which the conduct of the proceedings by RWC unnecessarily added to the time and resource which all parties including Phi and RWC expended in the 2010 proceedings.
RWC in November 2010 must have known that its engineering expert, Mr Jessep, felt professionally obliged to accept that RWC had fallen below the requisite standards of competent engineers; in effect, RWC must have known that its defence on liability was irreparably damaged. Notwithstanding this, RWC continued to deny and challenge liability until it conceded liability openly and formally as late as the sixth day of the twelve day trial. The “writing was on the wall” no later than the end of November 2010, given that Mr Jessep’s report was exchanged on 1 December 2010.
There was a fundamental misconception within the RWC ranks as to its ability in practice to challenge the overall efficacy of the Chiltern costs. In broad terms, Chiltern was not a party to the litigation but Carillion had to secure Chiltern’s agreement as the operator of the depot and thus was bound in reality to accept whatever constraints which Chiltern imposed. I said at Paragraph 171 of the main judgement:
“This is important because my broad acceptance of what the Chiltern witnesses have said in evidence leads inevitably to the conclusion not only that the constraints which Chiltern seek to impose are logical, reasonable and supportable but also that it consequently cannot be considered to be unreasonable on the part of Carillion to seek to do the remedial works in a way which recognises the need to comply with those constraints. Indeed, it is wholly reasonable for Carillion to do so. Carillion has been put into a very difficult position, both commercially and legally, by the extensive breaches of contract of Phi and RWC because twice in the past Carillion, albeit attributable to the fault of Phi and RWC, has failed to put right underlying defects in the soil nailed walls. It would be commercially unacceptable for and unreasonable to expect Carillion not to wish to put right, finally, the problems with these walls. To do that, Carillion must cooperate with Chiltern, who operate and operate in the depot, and it is, within reason, bound in practice and reality to accept whatever constraints Chiltern wish to impose. Of course, there is a point beyond which it might be said that Chiltern's constraints or requirements are so ridiculous and so grossly unreasonable that no person in Carillion's position could properly or reasonably accept them; for instance, if Chiltern insisted on the use of platinum soil nails at the cost of £100m, it would not be reasonable for Carillion, vis-à-vis RWC, to accept that constraint. However, it can not begin to be said that Chiltern's constraints fall within that type or category.”
Both Mr Justice Edwards-Stuart and I at earlier procedural meetings with the parties found it difficult to see how a railway expert, such as Mr Glasscock, could materially assist in challenging the constraints imposed by Chiltern (being working hours, the pinch point at the Country end and only Sunday working at that point, and the continued south-north operation of the depot during the remedial works); it was never seriously argued at trial that these constraints fell into the ridiculous or grossly unreasonable category. With some diffidence, the Court allowed eventually the deployment of railway experts. A significant part of the trial was spent in RWC seeking to undermine the Chiltern constraints as merely unreasonable. It was suggested by RWC that what it was trying to do was seek to show that in fact Chiltern was never really going to impose the constraints and was never going to service and refuel the displaced trains at Tyseley. That was going to require RWC in effect being able to demonstrate that senior Carillion and Chiltern witnesses were effectively conspiring together to mislead the Court and then the two parties would share in the ill-gotten damages proceeds; this was just fanciful. A good example was the daytime working hours requirement imposed to avoid noise nuisance to Chiltern neighbours at night; as found in the judgement, this could not begin to be described as unreasonable even if it was necessary to demonstrate that.
The challenge to the Chiltern constraints led to a wholly unnecessary expansion of the programming expert evidence. Dr Aldridge for RWC identified 17 alternative programming options with various variants on working hours and north-south use of the depot; these were all irrelevant if, as was the case, the constraints could not effectively be challenged. Suggestions that the local residents should be exposed to 24 hour working and intrusively loud sheet piling noise for instance and that they should be given double glazing were lacking in reality.
RWC’s arguments on causation were not wholly unreasonable but they largely depended on, first, RWC’s alleged lack of knowledge of the January 2005 slips and, secondly, on RWC’s limited involvement after and in connection with the October 2005 slips. The first point was almost fatally undermined by Mr Bird’s email of 17 February 2005 referring to these slips (see Paragraph 61 of the main judgement). The second point was not a strong one, albeit arguable, for the reasons adumbrated in the main judgement (Paragraphs 138-148).
RWC’s arguments on Carillion’s alleged contributory negligence were again arguable but relatively weak; they amounted to little more than saying that, although it had engaged Phi and RWC in relation to the design and vetting of the site investigation information, Carillion should have picked up the risk of shallow and deep-seated instability because it had a number of chartered civil engineers working on the project. Again, this was relatively easily rejected in the judgement (see Paragraphs 149-151); Paragraph 150 said:
“Whilst it is true that there were a number of chartered civil engineers who worked on this depot project, it is clear that none of them in fact picked up on the deep-seated instability problem or the deficiencies in the calculations or design. There is no and no credible evidence however that anyone within Carillion was charged with checking up on RWC or the substance of Phi's design or calculations. Dr Love raised the saying which has some if not an absolute resonance: why have a dog and bark yourself? Carillion employed Phi as specialist soil nailing contractors to carry out the detailed design and the installation of the soil nailing work; it employed RWC as its overall consulting engineer designer, its Lead Consultant and as its reviewer or checker of Phi's designs and calculations. There is no suggestion that RWC and Carillion operated on some convention or understanding that Carillion's personnel, even if they were chartered civil engineers, would vet the design, calculations or review process carried out by Phi and RWC respectively. The fact that a client of a professional consultant or contractor has some expertise which overlaps with that of its consultant or contractor does not mean, without more, that the client can or will be contributorily negligent if the client fails to notice at the time that its consultant or contractor has been negligent. This applies not only during the preconstruction stages in this case but also in the aftermath of the January and October 2005 slips.”
The effect of all this is that RWC chose, albeit as it was entitled to do, to run a number of defences, mostly of fact, which had little or no chance of success and it would be wrong to expect Phi to have to pick up a disproportionately large share of Carillion’s costs of dealing with a significant number of weak or unsustainable points being pressed by RWC without any active support for them from Phi.
That is not to say that there was not a coincidence of interest between Phi and RWC on quantum matters relating to the remedial works and their legal teams worked in part together to challenge aspects of quantum. It would also be wrong to categorise everything done by RWC as unjustified or weak; after all, quantum was reduced by about £1.8m. It was also the case that Mr Glasscock’s efforts did at least result in an effective pre-trial challenge to some illogical aspects of Chiltern’s costs, in respect of which some concessions running to some hundreds of thousands of pounds were made.
It is the case that for reasons best known to them but possibly reflecting the matters set out at (b) to (e) above, Carillion and RWC agreed that RWC should pay Carillion’s standard costs to 28 December 2009 and indemnity costs thereafter. Since providing a copy of the draft judgement on costs to the parties, it has emerged that Carillion made a Part 36 offer dated 8 December 2010 to RWC to settle the case at a net sum of £3.2 million; this was open for acceptance for 21 days but was withdrawn apparently on the 15th February 2011. It may be that RWC had this in mind when agreeing to pay indemnity costs from 28 December 2010. Whatever the reasons were, none of them can or do obviously relate to anything which Phi did or failed to do in the litigation. I do not see why Phi should have to pay the indemnity cost element of this.
I have formed the view that taking all the above factors into account Phi should bear 20% of Carillion’s costs, which RWC has been ordered to pay.
The Costs of the Respective Contribution Proceedings
This part of the exercise of the Court’s discretion represents a difficult conundrum. Both RWC and Phi had its respective contribution proceedings against the other and each has been successful: Phi recovered over 40% contribution from RWC and RWC secured a 60% contribution from Phi. Phi has the additional point that, as between February and November 2010, it had a valid offer, capable of acceptance, to RWC to compromise the 2009 Claim and contribution proceedings, at a level which, ultimately RWC did not “beat”, albeit that it only related to the 2009 proceedings and not to the 2010 proceedings; however, that was effectively withdrawn in early November 2010. RWC has the additional point in its favour that, in relation to the offers made in November 2010 by Phi, it "beat" those offers by over half a million pounds and, in effect, had to go on against Phi to secure that.
Mr Bowdery QC for RWC argues that, as ultimately it was successful on its proceedings and it "beat" the November 2010 offers, it has "won" and it should have all its costs of its contribution proceedings and in effect the costs of the contribution proceedings against it by Phi. Mr Hughes QC argues, largely based on its contention that its February 2010 offer was a Part 36 offer and continued in effect up to judgement and because it “won “ on its contribution proceedings, that it should have the costs of the two sets of contribution proceedings.
I have in practice considered on reflection only two possible realistic costs orders, the first being that each party should pay its own costs of the respective contribution proceedings and the second that Phi should pay a proportion of RWC’s costs of its contribution proceedings against Phi. On balance, and in the exercise of my discretion, I have formed the view that the latter is an appropriate order. This takes into account the facts that the February 2010 offer had lapsed by and by reason of the November 2010 offers and that in the light of the later offers RWC had to go on to secure, as it did, a larger contribution than was being offered in those offers. RWC should have accepted the February 2010 offer but that would not have compromised in law the contribution proceedings in the 2010 action; the acceptance might well have dictated in commercial terms at least what RWC could expect to recover in the 2010 contribution proceedings but it would not have bound the Court. However, the earlier offer was effectively withdrawn and was not capable of acceptance in the period of the 2010 litigation, post-November when by all accounts the bulk of the costs were incurred by each party.
In all the circumstances, I consider that justice would be best served by an order that Phi pay 30% of RWC’s contribution proceedings against it and that there is no order as to costs in relation to Phi’s costs of its contribution proceedings.
Phi has asked for permission to appeal against this judgement. I do not consider that there is any realistic prospect of success in the Court of Appeal against the exercise of the discretion on costs. In seeking permission Phi has sought to deploy several authorities (particularly Hertsmere Primary Care Trust v The Estate of Balasubramanium [2005] EWHC 320 (Ch)) which were not cited to the Court before the draft judgement was circulated. The argument largely revolves around whether or not the February 2010 letter was a Part 36 Offer; that has been dealt with above and in the light of the Susan Gibbon case that this does not stand a realistic prospect of success. The permission to appeal form will go into this in a little more detail.